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MNI Riksbank Review - Jan '25: Tentative Approach to Continue

The Riksbank Executive Board voted unanimously to cut the policy rate by 25bps to 2.25%.
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EXECUTIVE SUMMARY: 

  • The Riksbank Executive Board voted unanimously to cut the policy rate by 25bps to 2.25%. This brings the policy rate in line with the December MPR rate path’s “terminal rate”, and also the mid-point of the Riksbank’s 1.5-3.0% nominal neutral rate range. 
  • The policy statement did not contain explicit forward guidance for further rate cuts, noting that “the forecast for the policy rate made in December essentially holds, but the Executive Board is prepared to act if the outlook for inflation and economic activity changes”. This was in line with the expectations in MNI’s preview, but some analysts had expected hints of another cut in H1 2025.
  • Although the Governor did not respond to a question on the balance of risks to the December rate path, we think the use of “prepared to act” in the policy statement is clearly focused on the case for more cuts, rather than a surprise pivot to hikes.
  • As noted in our preview, we continue to believe the Riksbank will be happy to cut rates below 2.25% if justified by the incoming data. 

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Riksbank Review - 2025-01.pdf

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EXECUTIVE SUMMARY: 

  • The Riksbank Executive Board voted unanimously to cut the policy rate by 25bps to 2.25%. This brings the policy rate in line with the December MPR rate path’s “terminal rate”, and also the mid-point of the Riksbank’s 1.5-3.0% nominal neutral rate range. 
  • The policy statement did not contain explicit forward guidance for further rate cuts, noting that “the forecast for the policy rate made in December essentially holds, but the Executive Board is prepared to act if the outlook for inflation and economic activity changes”. This was in line with the expectations in MNI’s preview, but some analysts had expected hints of another cut in H1 2025.
  • Although the Governor did not respond to a question on the balance of risks to the December rate path, we think the use of “prepared to act” in the policy statement is clearly focused on the case for more cuts, rather than a surprise pivot to hikes.
  • As noted in our preview, we continue to believe the Riksbank will be happy to cut rates below 2.25% if justified by the incoming data. 

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI Riksbank Review - 2025-01.pdf